Determine the futures price at the end of week

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Question - Mr. Smith enters into the long position in 5 S&P 500 futures contracts. His brokerage account requires an initial margin balance equal to 15% of the notional amount and a maintenance margin equal to 80% of the initial margin balance. The contracts will be marked to market on a weekly basis. The margin balance will earn interest at a rate of 8.8%. As of today, the S&P 500 futures price is 3,038.

a. One week from today, the S&P 500 futures price is 3,060. Determine Smith's  margin balance at the end of week 1.

b. At the end of week 2, Mr. Smith receives a margin call in the amount of 12,345. Determine the S&P 500 futures price at the end of week 2.

Reference no: EM133046386

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